A Metro train passes in front of new apartments in Dwarka, New Delhi, India (Photographer: Amit Bhargava/Bloomberg News)

Crisis-Hit DHFL Sees 95% Drop In Fresh Loan Disbursements In Q3

Dewan Housing Finance Corporation Ltd., one of the worst hit by the liquidity crisis that engulfed India’s non-bank lenders, saw loan disbursements plummet by 95 percent in the third quarter of the current fiscal.

DHFL disbursed a mere Rs 510 crore in loans during the quarter ended Dec. 31, 2018, according to an earning release put out by the company on Friday. In the previous quarter, the firm had disbursed Rs 13,870 crore and in the year ago quarter disbursements stood at Rs 10,850 crore.

Net profit in the third quarter fell 36.7 percent to Rs 313.6 crore compared to Rs 495.4 crore a year ago. Net interest income was down 12.3 percent at Rs 840.6 crore compared to Rs 958.9 crore.

DHFL was hit hard when liquidity tightened for non-bank lenders after the collapse of Infrastructure Leasing and Financial Services. A sale of DHFL debt securities by a mutual fund at a significant discount sparked panic about DHFL’s operations. With virtually no access to market funding, DHFL was forced to curtail fresh lending and generate liquidity to repay existing liabilities.

The crisis also forced the lender to actively sell down loan portfolios. The result was that its outstanding loan book contracted on a quarter-on-quarter basis.

The firm’s loan book outstanding stood at Rs 96,839 crore at the end of the December quarter compared to a book of Rs 1.10 lakh crore at the end of the September quarter.

In a statement, the lender said that it is taking steps to pare down its developer loan book in particular.

We took steps to down sell developer loan portfolio and bring them to a level of Rs.10,000 crore by March 2019, reducing the builder book by about 50 percent from the levels of September,” said a press release from the company. It added that, so far, it has sold 10 percent of its developer loan book including the sale of a Rs. 1,375 crore portfolio on Friday.
DHFL Statement

Rating agencies had raised concerns over the increased proportion of developer loans on DHFL’s books. In a note in December, rating agency ICRA had noted that the share of housing loans in the lender’s books had reduced to 57 percent as of Sept. 30, 2018 compared to 66 percent a year ago.

“Given that the project loan book is recently originated, and a large portion of this portfolio remains under moratorium, the portfolio remains relatively unseasoned,” ICRA had said cautioning about possible asset quality risks.

At present, asset quality risks for the lender remain contained. The gross non performing assets ratio stood at 1.12 percent at the end of the December quarter compared to 0.96 percent at the end of the last quarter.

Liquidity & Capital

To ease the fear of default, DHFL used bank credit lines, loan portfolio sales and other means, to repay market debt.

“We discharged liabilities of close to Rs. 18,000 crore since Sept. 21, 2018 including repayment of commercial papers amounting to Rs. 9,965 crore till December-end. With this, CP outstanding has reached a level of just 1 percent of our borrowings,”

In its credit perspective, ICRA had noted that DHFL is dependent on the refinancing of maturing liabilities given the relatively longer tenure of loans inherent in the housing finance industry. The company, however, has indicated the share of fixed deposits is increasing and was at 10 percent of its liability base as of September.

The company is also taking longer term measures to improve its position, it said. This includes the sale of non-core assets. Among the assets it is looking to sell is the Aadhaar Housing Finance division, held by Wadhawan Global Capital.

The sale of non-core assets are in the advanced stages and we expect to close a major one by Jan. 30, 2019, said the firm.

Our overall commitment is to bring in capital to the tune of Rs. 2,000 crore by March 2019. Our leverage will come down from 9.27 to 7.5 times by this process.
DHFL Statement